United Rentals' (URI) Shares Up 3% Post Upbeat '19 Guidance

United Rentals, Inc.’s (NYSE:URI) shares increased 3.2% on Dec 11, 2018, after it reiterated full-year 2018 guidance and issued 2019 view.

The company reaffirmed its full-year 2018 revenue expectation of $7.89-$7.99 billion. This reflects an increase of 18.8-20.3% from $6.64 billion in 2017. Also, adjusted EBITDA is projected between $3.815 billion and $3.865 billion.

For full-year 2019, total revenues will be between $9.15 billion and $9.55 billion. Moreover, the company projects adjusted EBITDA in the range of $4.35-$4.55 billion, which is 14-17.7% higher than the projection for 2018.

Net rental capital expenditure after gross purchases is likely to be in the range of $1.4-$1.55 billion (after $2.15-$2.3 billion of gross purchases). Net cash provided by operating activities is projected in the range of $2.85-$3.2 billion, up from 2018 projection.

Also, free cash flow is expected in the range of $1.3-$1.5 billion for 2019.

Moreover, the company remains optimistic about its year-end 2018 and full-year 2019 growth prospects. United Rentals made five acquisitions during 2018, which are likely to boost its general rentals and specialty segments.

The company intends to restart its share repurchase program, which was paused on Nov 1, 2018, of $1.25 billion during this December, in order to focus on BlueLine acquisition. It has already repurchased approximately $210 million shares through Sep 30, 2018 and plans to complete the program by the end of 2019.

Factors to Drive Growth

The world’s largest equipment rental company enjoys strong brand recognition, which enables it to draw customers and build customer loyalty. The company has a strong earnings and revenue surprise history. It surpassed earnings expectation in six of the past seven quarters. Also, the company topped revenue estimates in all the past seven quarters.

The company’s strong business conditions are evident from its upbeat outlook. The company follows a robust expansion strategy via acquisitions and joint ventures. In October 2018, United Rentals acquired BlueLine, one of the ten largest equipment rental companies in North America. This acquisition will boost the company’s capacity across the largest metropolitan areas in North America, including U.S. coasts, the Gulf South and Ontario. Also, the buyout will increase United Rentals’ fleet by more than 46,000 rental assets across 114 branch locations.

Apart from the inorganic drive, solid end-market demand also bodes well for the company. United Rentals serves the following three principal end markets for equipment rental in North America, namely industrial and other non-construction, commercial construction and residential construction. The overall outlook of the construction market remained positive so far this year. Consequently, the demand for United Rentals’ products should increase as well.

Although shares of United Rentals have underperformed its industry year to date, earnings estimates for 2018 and 2019 have moved 0.3% and 1.8% north, respectively, over the past 30 days, reflecting analysts’ optimism surrounding the stock.

Zacks Rank & Stocks to Consider

Currently, United Rentals carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Construction sector are Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) , Altair Engineering Inc. (NASDAQ:ALTR) and EMCOR Group, Inc. (NYSE:EME) . While Great Lakes currently sports a Zacks Rank #1 (Strong Buy), Altair Engineering and EMCOR both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Great Lakes, Altair Engineering and EMCOR’s 2018 earnings are expected to increase 111%, 23.1% and 20%, respectively.

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